Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy, where I interview entrepreneurs about how they built their businesses and I do it for an audience of real entrepreneurs.
A while back, I got an email from someone who listened to my podcast and said, “You know, Andrew, I’m running an agency and it’s hellacious.” I said, “Why?” I want to know what parts of people’s lives is hellacious so I can help guide my guests to answer the problems that my audience have.
So this guy said, “Well, I’m trading a lot of time for dollars. Yes, I’ve got an agency. Yes, it’s a real business. If I told you the revenue, you might be impressed, but what you wouldn’t know is how much of it is me doing the work and how much of it goes out to me spending money on other people doing the work and how it would all fall apart if I got sick for a little bit.” This is where I thought I was a genius.
I said, “Did you hear my interview with Jason Fried? These guys started out as an agency, and then they created Basecamp and the software has taken off. All they have to do is find a problem that you have or someone in your audience has and turn it into software.” He said, “Yeah, Andrew, I heard it, but it’s actually not that easy. It’s really hard to find the time to do it. We’ve tried it. It messes with our business, and also it hasn’t worked out. It’s hard to sell software, especially if you run a whole business.”
I’ve been looking for an answer for him and so many others who had that same problem. Then I started looking at the messages I got from listeners. More and more, I’m hearing about Jason Swenk and how he had an agency that did marketing. Jason’s the person who you’re about to listen to in this interview. It was called Solar Velocity. He found a way to actually systemize the business, to professionalize it, and to sell it. He sold it to a company called Northridge, which was a publicly traded company.
So I invited him here to talk about how he did it. Where did he started systemizing? What worked in his journey for systemizing his business? Why was he able to sell it and have it stand alone where other people can’t? I know that he’s going to do a good job because he on his personal site, jasonswenk.com, has been talking about this and in some videos, he’s been talking about this and teaching this. So I know he’s going to do a great job here.
So this interview with Jason is sponsored by two phenomenal companies that you’ve heard me talk about a lot because so many of my audience members are switching to them. The first will host your website right. It’s called HostGator. The second will help you hire well. It’s called. Toptal. Jason, good to have you here.
Jason: Hey, Andrew. Thanks for having me, man. I’m excited to be on the show.
Andrew: Jason, I like you and still I didn’t trust that you really had a company that you sold. I went back in time to see what Northridge—what’s the name of the company?
Jason: Northridge and then Proficient.
Andrew: They were acquired by Proficient, right? I went back to see what did they say at the time? Why did they acquire you? I found this whole press release and I found a description and you did. What I couldn’t find was what your revenues were at the time.
Jason: Yeah. We were $13.1 million.
Andrew: $13.1 million doing what?
Jason: We did social media, a lot of web design, and a lot of application development. So, like for example, we did everything for LegalZoom. We started that brand and helped them from the marketing side to the development side.
Andrew: You helped them come up with the logo and the design of their first site?
Andrew: You did? Then you also did some coding work for your clients?
Jason: Yeah. We did a lot of custom programming. Really, if you go back in the days, the early 2000s and all those, putting creative in development, that was unique. You were either creative, or you did a lot of development. So that was our competitive advantage for a while until everybody started doing it. Then we had to find other ways to do it.
Andrew: I don’t think you started out with that, right? We’ll get into the whole story of how you did it. What did you sell the business for? How much money?
Jason: I never disclose that. It was a lot of zeroes. We did very well. But we also did—the only thing I tell people is we did leave a lot of money on the table because we did do an earnout, which cost us millions. But we’re still happy.
Andrew: Because the business wasn’t able to earnout what you—an earnout is you have to hit certain sales and profit targets. Was it sales or profit or both?
Jason: Sales and profit. The trick that I wish I read in a book or someone told me was you just lose control. You’re literally a highest paid meeting coordinator and you have no say. So, literally, they can control it where the numbers don’t work.
Andrew: Did you get that with more than $2 million in your pocket, in your bank account?
Jason: Oh, yeah.
Andrew: Can you say if it’s over $6 million?
Jason: It’s getting there.
Andrew: Okay. I’ll leave it there. That gives me a sense of size. It’s interesting that you worked for Arthur Anderson doing web development for them. Give me an example of the type of project you worked with for them.
Jason: Well, that’s the deal. So when I graduated in the late ’90s, everybody was treating all the computer programmers as like professional athletes, like signing bonuses and trying to get everybody certified and just throw all this kind of money because all the dotcoms were coming up. People were making a gazillion dollars from doing this. So they paid us all to do this custom programming, but they never once put us on a project.
Jason: No. I could live anywhere in the world I wanted, and they would just fly you out on projects when they needed you, but they never needed me.
Andrew: I guess you were there for, what, about a year before the dotcom—
Jason: Six months.
Andrew: Six months? You had a signing bonus too?
Jason: Yeah, $5,000 signing bonus.
Andrew: Where did you decide to live?
Jason: Well, I was in Panama City for a while, and then I moved up to Atlanta.
Andrew: Okay. You didn’t go more exotic than that?
Jason: I wish I did. Now, I bought a place in Durango, Colorado. I wish I moved out there later or earlier, but then I would have never met my wife or had the life I have now. So it all worked out.
Andrew: All right. N’Sync is somehow responsible for getting you into web design and starting your career.
Jason: Justin Timberlake.
Andrew: Justin Timberlake?
Jason: So I don’t know Justin, but one of my best friends looked just like Justin Timberlake. So, at the time, N’Sync was really popular, and so I created a fake band, fake website, fake music, everything and we called it N’Shit. It was literally even on a GeoCities URL because we didn’t even buy a URL. It got popular. Everybody started emailing it around and all that kind of stuff. Then people started asking me to design websites.
Andrew: Because they saw that you did a GeoCities—
Jason: I started doing my first [inaudible 00:06:45] $500.
Andrew: What, sorry?
Jason: I did my first website for $500.
Andrew: Let me take a moment here. For people who don’t remember, GeoCities was just one of these shared hosting websites, kind of like BlogSpot.com but worse. You created a site on there and because you were able to use this software, which anyone could use, people came to you and said, “Can you create a website for me?”
Jason: It was crazy.
Andrew: They weren’t turned off by the fact there’s Shit in the name of the site that you created?
Jason: No, they thought it was hilarious. My first client was a real estate agent, Charlie Commander, C21-something. Then my second client was Syfrett & Dykes. Here’s the other funny thing. I always knew I wanted to create a business, but I didn’t really pay attention in school. The only thing I really learned from school was outsourcing. So I didn’t really know how to do much other than create funny websites. They asked me to send them an invoice. I didn’t know what an invoice was. There was no Google. Everyone is like, “Well, Google it.” There was no Google in ’99.
Andrew: What did you do?
Jason: Asked my dad.
Andrew: I remember being asked for an invoice when I was a kid. Thankfully, Microsoft Word came with an invoice template. So you could just adjust that. I remember the first time I talked to Mike McDermott, he said, “My idea is doing invoices online.” I said, “Did you see there’s a template in Microsoft Word?” He said, “Andrew, what you don’t know . . .” I didn’t get it. How’d you get your second client? I’m not familiar. You mentioned the name like I was supposed to know it, and I was embarrassed to say I don’t know them.
Jason: No. No one knows them. They’re not big or anything.
Andrew: Was it another person?
Jason: It was a small local business. So after those two, then I literally was like, “I like this and I can create a cool job out of it.” So, literally, I opened up the phone book. It’s the phone book not for like making you look taller when you’re driving. It actually has numbers in it and you can actually call people. I literally started going through the Yellow Pages. I literally would go, “Oh, there’s no website address.” I would just call them up and be like, “Hey, I design websites. Do you want one?” They’d be like, “What’s a website?”
Andrew: This is 1999.
Jason: Yeah. It’s crazy.
Andrew: Okay. Then you would sell them on a website. Do you remember one of the things that in retrospect feels stupid about the way that you sold them or the way you collected money or worked with them?
Jason: Well, I remember I worked with—I can’t remember the organization. My dad put me in contact with them and he said, “Look, you’re starting to sell a bunch of websites.” It was like Small Business Association or something like that. They said, “Jason, there’s a broken part of your model. There’s no reoccurring in it.” I’m like, “Well, what do you mean reoccurring?” He’s like, “Well, you’re just selling and going.” I was putting people on GeoCities domain names. I was like, “You don’t need to pay me for hosting.”
Andrew: So it would be something like—I don’t know what GeoCities was like—but I imagine GeoCities.com/~MyLocalBusiness. That’s what you’d give to me?
Andrew: Oh, okay. So you didn’t have any consistent ongoing revenue from them. So, at that point, when you heard that you should do that, did you do that?
Jason: I did. Then I actually started charging them for hosting on GeoCities.
Andrew: Oh, on GeoCities. So you would say, “And if you pay me, I’ll make sure your website is up month to month.” Were they also getting extra services?
Jason: No, not in the beginning. But later on, then I started saying, “Let me get you up in Lycos and Excite and Altavista.” These were the search engines.
Andrew: Is it an extra fee to list them in these search engines?
Jason: It was. Then I started doing it for like $250 a month.
Andrew: By the way, this guy who doesn’t know to charge recurring fees was working at Arthur Anderson. You’re talking about roughly the same—actually, as you were working at Arthur Anderson, you started this business. This is just generally on the side. It’s not that you don’t know it because you’re not a smart person. Arthur Anderson is very selective. It’s just that it’s not a common thing. You just don’t think about it. Then once you did, you started adding it. I looked to see what the early version of your website was like. It doesn’t seem like you had one until—when was it?
Jason: You look up Swenk Technologies. That was the first name of it.
Andrew: Oh, Swenk Technologies. Let me take a look—.com?
Jason: Yeah, SwenkTechnologies.com. Then we switched it maybe a year or two years later to Solar Velocity.
Andrew: Why did you go with Solar Velocity? What was the goal there?
Jason: So here’s the story on that one too. It’s a good one. I’ve never told anybody this. So this is fun.
Jason: So I got tired of calling people up going, “This is Jason Swenk with Swenk Technologies.” It was just a tongue twister. It just didn’t seem right. I was some young punk kid right out of school. I started selling a ton of websites. This person I started playing tennis with did a lot of computer programming. I was better on the design side. He was doing a lot of the hosting. He got invited to go to a tradeshow and he said, “There’s a person here who wants to sell for us. You have to get him business cards and I have to get him business cards.”
I was like, “That’s going to be confusing. Let’s just join forces. Let’s just create one business card, one company.” That’s where kind of we were like, “Let’s just join the companies together.” Then we basically did the Sesame Street of Solar and Velocity. Like he loved the celestial stuff. I loved the speed. That’s why I got the race helmet and racing, velocity. We just put it together.
Andrew: I’m looking now at Swenk Technologies. You were doing website design and redesign, which is what we talked about, graphic design, including photography and Flash, website promotion.
Jason: Oh my gosh, Flash.
Andrew: That’s pretty good. Then at some point, you did offer web hosting and domain registration. That’s the beginning of it. I then noticed that you leave your job at Arthur Anderson to do this full-time. Were you making enough money to make up for the—you were? It wasn’t—
Jason: Yeah. I wasn’t making as much. They paid us $50,000 a year for salary to start out. It was literally the partner would sell the deal and the school bus would drop the kids off. We’re just sitting around. My first year in the agency, I think I made around $30,000. That was huge for me, right? I’m used to living off Ramen Noodles in college. I can get by. Then the next year, I think we went to like $60,000. Then all the years after that, we were always above $100,000 and really growing it.
Andrew: How much was you still making phone calls to get those early clients?
Jason: We did that for a long time.
Andrew: A long time?
Jason: A long time, yeah.
Andrew: You personally?
Jason: Me personally, yeah. That was something I can control, right? Then we started building the business. We would get a lot of referrals, but I realized something really early on that I saw a lot of people—when we started getting a lot of momentum—this was when 9/11 happened and right before the dotcom crash.
So there were a lot of companies that went under because they put all their eggs into Coke. Then the referrals dried up. I quickly realized that I didn’t want to put any dependence on anybody else. I knew on outbound, I could control it and I could do it and I could go after the people who I wanted to help. That’s what we did.
Andrew: As opposed to some of the bigger competitors who said, “We’re going to work with only funded companies. You have to have this much funding to work with us,” and then they lost a lot of business fast. So one of the things I noticed about your early website was a real emphasis on how there is a crash in all these internet companies, they all disappeared, but we’re here, we’re still growing. From 2003, “While most internet companies are slowing down and going bankrupt, we are growing faster than ever.” I wonder now that it’s been a few years, over a decade, how much of that was true? Were you really growing during the dot-bomb?
Jason: We were.
Andrew: You were?
Jason: We were.
Andrew: Who’s paying for this?
Jason: Well, we were going after the companies that no one wanted. Like it was just perfect timing. I’m not going to say I was smarter than anybody, but I did work harder than a lot of people and I was consistent. I think a lot of it was great timing, right? Some of these bigger companies like IXL, they were huge. They would just buy up all these agencies. They were going after big people, so they had a huge overhead.
Well, we were working in my apartment. We were small. We were scrappy. We didn’t need much. So we leveraged that in the very beginning in order to get past and learn a lot, really kind of learn on other people’s dime, even though we delivered value to people. Looking back, the years to come, we did deliver a hell of a lot more value later one because we just knew more.
Andrew: By learning, you mean they hire you to build a website. You’re not exactly sure how to build a website on its own domain. You say, “Great, you guys are going to pay me to build this website. I’m also going to get paid in education because I have to figure out how to do it.” So I’m looking at a version of your site from those early days. One thing that you used from the very beginning was stock photography, even back at a time when most people didn’t know stock photography was a thing. It felt like you had professional photo shoots.
Jason: You’re looking at the photos that were like shot from the ladder looking down. I remember these.
Andrew: It’s very much a man and a woman in a suit high-fiving or cheering something.
Jason: It’s so bad.
Andrew: Cheering that they got the results, one hand cheering or high-fiving and the other hand holding on to an attaché case. As I went through your site over the years, that’s what I saw.
Andrew: For a long time, it was that. It was web design, web hosting, marketing. At some point, you added programming. I was trying to figure out when that came in. It seems like that was fairly early, 2002 or so.
Jason: Yeah. We added it pretty early. Like I was telling you, we started really wanting to separate ourselves and really look at how can we be unique. Also, too, we had visions of building our own programs to make our life easier. We were one of the first to do an email marketing system. We were one of the first to do a content management system. We just didn’t do it as a SaaS. We were doing it as an install every time. Then we just didn’t do it the right way. We can go down that road.
Andrew: Let me see if I understand this. I’m looking at a list of the things that you offer development-wise. It’s customizable online shopping carts. So if somebody came to you and said beyond designing, Jason, I need a shopping cart to sell, you had software for that. Real-time auctions—so if they wanted to take on eBay or have an auction thing on their site, you were doing it, all the way down to email marketing software, which is like a MailChimp, Aweber. That’s basic stuff like that. That’s what you were doing. You weren’t going in depth with ActiveCampaign or Infusionsoft. Look at this—guestbook software and trivia software.
Jason: Guestbook, oh man, you’re bringing back the memories.
Andrew: Guestbooks, for people who don’t know, when somebody would come to your website, you didn’t know who they were. There wasn’t deep tracking. So there was a button on my websites where people could sign your guestbook. That’s how you knew who came to your site and that’s how other people knew there was activity and life on the site. It was also a way for people to scribble their mark on a website, which felt cool at the time. The thing I’m wondering as I see this is how much of it did you create yourself and how much did you just buy off-the-shelf software that you can them implement for your clients?
Jason: We did everything but the guestbook stuff.
Andrew: You automated email software from scratch?
Jason: Yeah. We did everything but the guestbook.
Andrew: Why? Why did you create email software from scratch?
Jason: They didn’t have those things back then. Or we weren’t resourceful enough to find those. This was before MailChimp. This was right when Constant Contact came out.
Andrew: Okay. You were saying—how did you know what to offer and what not to?
Jason: We were looking at our clients’ problems of what they’re having. We wanted to do more than just design a website. We wanted to give them the control in order to be able to update their website. That was a big thing back then, right? They were spending a lot of money with us to design their website, but we always would tell them in the strategy to be like, “Look, it needs to adapt. Technology is going to be so different. We don’t even know where it’s going to be in a year.” We were designing for like Netscape Composer 2.0.
Andrew: Yeah. It’s so basic. Right. It was cross-platform.
Jason: Yeah. And then we were like, “Okay,” when we started sending out emails, we were like, “Let’s start building a list and let’s start sending out those emails.” It was like our open rates were sick. It was like 80%. Our click-through rates were like 60%, 70%. Now, obviously, you would kill for those numbers. You get those numbers in chat bots.
Andrew: In email, it’s not as powerful anymore. That’s the power, by the way, of jumping in early, being able to call in to people and say, “You don’t know what a website is, but there’s a good chance you also don’t have one.” Everyone is a potential customer. At that point, who was doing the development work?
Jason: We hired some people to do that.
Andrew: Internally, full-time people?
Jason: My business partner at the time, he was more of a programmer than I was. I saw pretty colors and I could understand code, but I just didn’t have the passion to do it anymore, even though I’ve created CRMs in the past and that kind of stuff to manage like our personal CRM. I was like, “I don’t like it. I like going through the user experience and all that cool stuff.”
He was doing a lot of programming, and then we hired two programmers to really take it up a notch. Some of those guys actually came with me from Arthur Anderson. They were really good. They were the people that I would cheat off of on the exams. So I brought them over. I was like, “Oh, you made me look smart. Make me look smart again.”
Andrew: So now that you got all this experience, looking back at that—let me take a moment to talk about my first sponsor and then we’ll come back into this. First sponsor is a company called Toptal for hiring developers. Jason, you’ve hired developers, hired designers—actually, Toptal does designers too. What’s one piece of advice that you can give? As part of this ad for Toptal, let’s make into advice for anyone who’s hiring. What’s one thing they should think about when they go to Toptal to hire someone?
Jason: It doesn’t matter if they’re the best coder in the world. If they don’t match your company culture, don’t hire them.
Andrew: Why? I’ve said that in ads in the past for Toptal, only because they pay for it and they say, “Andrew, it’s important that we emphasize that company culture is important.” Why does it even matter when you’re hiring a developer on a per project basis or part-time basis, especially if they’re remote, why do you care about the culture? Give me an example.
Jason: They have to believe in what you believe and what you’re creating. If they don’t understand the reason behind something or have the passion for being creative or sharing that knowledge with someone else, yeah, they may be good just for that one project, but it’s going to set you up for failure for the next one. We believed in our core culture, share your wins, communicate what you understand to other people, help other people out.
By doing that, you’re going to get better as an organization versus just—it’s kind of like one of my favorite movies is “Miracle” on the 1980 hockey team. The all-star team before that got destroyed because they put all-stars together. It’s about putting the right people in the right seat. I think like the “Good to Great” book.
Andrew: Okay. When you go to Toptal, one of the first things that you’re going to do is see a green button. You hit that green button. You fill out their form and then you don’t get a developer. You don’t get the designer. You don’t get to tell them what you’re looking for and get it served up to you on the web. What you get instead is a phone call with a matcher, which is like the yenta in the movie—what’s that movie? Whatever the movie is, the matchmaker, “Matchmaker, matchmaker, make me a match.”
They get a yenta who’s in your business like a yenta who understands who you are and how you operate, helps you think through the role properly and then they go back into their database of developers or designers depending on which one you’re looking for and they find someone who doesn’t just have the task experience, meaning they’ve done this before so many times that they could say, “Oh, I got it,” doesn’t have the ability to just reason away to a solution, but also will be a company culture match for you.
So anyone who’s listening to me should go to hit that green button, and there’s a URL where you will get 80 hours of Toptal developer credit when you pay for your first 80 hours, in addition to a no-risk trial period of up to two weeks. I should say because I talk so fast it’s top as in top of your head, tal as in talent.
When you go to this URL, hit that green button. It’s Toptal.com/Mixergy, Toptal.com/Mixergy. Be sure to check out that they have 100% moneyback—actually, not even moneyback. You’re just not going to be billed if you’re not happy. Check it out on that URL, Toptal.com/Mixergy.
Jason: I wish they were around when I was doing it.
Andrew: They’re fantastic. They’re around now. I’m telling you, your people are going to need them at some point in the future. This is now lodged in your head. You’re not going to remember the /Mixergy, which is fine be me, though you will miss out, but someone who comes to you asking for help is going to say, “Where do I hire . . .?” And you’re going to say, “Toptal.”
Jason: I’ll remember this interview. You’ve made me remember some stuff I haven’t thought of in 15 years.
Andrew: I like that. Going back to that period, is there an ouch? Is there something that you look back on now that you know how to run agencies that makes you think, “Oh, I wish I could have done this thing better,” run it without making this one big mistake. What’s a mistake?
Jason: How long do you got? There’s so much. I really think one of the biggest things is not defining our niche early on or having that clarity. Think back at how I started. I got started by accident, right? I think a lot of entrepreneurs or a lot of agency owners get started by accident. We knew how to do something cool, and then someone offered us money.
They threw money and you were like, “We can do something cool. We’re creating a job for us.” But years go by and you’re just being reactive to the market, but you don’t have that end destination. You have a GPS, but you don’t know what the end destination to put in. So you don’t know what to say yes to. You don’t know what to say no to.
Andrew: I do see that on your site. I was grasping to understand who you were going after, what your method was for getting clients. I couldn’t figure out how The Diamond Girl, which is a place to get engagement rings, fits in with LA Boxing, which fits in with real estate brokers, which fits in with lawyers. I could see that it was all over the place. If you could pick—oh, and a hair loss place—if you could pick a destination for your business back then, what’s an example of one that you would have picked?
Jason: I would have picked a niche around probably the automotive space. I love cars. I love that kind of racing and velocity. I would have picked something around that going after like Napa and those types of companies and just putting out content for them. Think about if you could have started a blog back then. How much momentum—Seth Godin, right? Huge momentum. You’ve been doing it forever as well. Just keep talking about the same thing and build that authority.
It’s the same thing I’m doing for this particular business right now, where I just put out information for agencies. I’ve been doing it for five years and it’s unbelievable business. But I’m able to understand my customer and my client. I understand what they want to transform into. I understand what their pains are. In fact, like you were talking about with New Horizons hair loss or hair replacement or The Diamond Girl—
Andrew: Weren’t they all asking for the same thing essentially back then?
Jason: They wanted a presence and they wanted to come up on the search engines and get new business.
Andrew: So maybe in the beginning that was okay, because everyone who came online was kind of similar, but eventually branched out. The place that does hair loss is looking for one thing. The place that does real estate is looking for another. Real estate is probably looking for an updated website that also collects contact information, gets on the phone, hair loss maybe—got it. What about the way you ran the company internally? It’s easy for me to see this on Internet Archive. It’s harder for me to see internally the chaos or the order. What was going on?
Jason: Well, I think the clarity affected that as well. So many of the first probably five years every employee we hired had a hard time making a decision based on moving the company forward because we didn’t give them the end destination, right? Think about you’re in a boat and you have to go to sleep because you can’t stay up 24/7, right?
Someone has to operate the boat. If the boat starts going off course, they have no idea where to course correct. So I never gave the power to my team until I really started saying, “This is what we’re going to do. We’re going to dominate the creative and user experience with a content management solution.”
Andrew: That was it, creative and user experience with content management?
Jason: Yeah. We’re going to give the power back to people to have a good user experience and be able to adapt their website. That was kind of the positioning back then. When we said that, we were like, “Okay, how do we create the three pillars? The three pillars I look at now are inbound, outbound and strategic partnerships.” Back then, we really didn’t have inbound. We didn’t have a blog. We didn’t put out a lot of content.
So we had to think about what was the outbound strategy, who were we going to call, and then what were the strategic partnerships. That’s when we started partnering with a company called Sitefinity, which a lot of the bigger brands were starting to use. We did the same thing with SharePoint. We started getting clients like Hitachi and Lotus Cars because of our user experience as well as what we could do to customize that CMS to their needs.
Andrew: Were you also focused on a type of customer?
Jason: Bigger companies. They had to be over the $20 million mark.
Andrew: And you made that decision how? How did you decide that was going to be the group of people you went after?
Jason: I got a call one day from this company and just rocked it on the call. You know you get off the call and you’re like, “Yes, I nailed it.” And they invited me in. They were in Atlanta and I was like, “Cool, I’ll come to your office.” We walk into this room. It’s a huge boardroom. I’m like, “Holy cow. This is a big company. Who are these people?”
All these suits come in. They sit down. At the time, we were charging maybe like $10,000 for a website. That’s what I pitched them. They said, “Jason, this all looks good. What do you charge?” Literally, I had the proposal. I had it written out and all this. I handed it to them. They literally started laughing. I’m like, “Laughing? Is it too much?” That’s what I said to them. They were like, “No, Jason, our expectations were this would be $200,000.”
So there’s something we’re missing. Then I go back to the office and I tell my business partner and employees we had at the time and I said, “They laughed at me because they were expecting $200,000.” They were like, “Who’s the company?” I was like, “Some company called Berkshire Hamilway?” They’re like, “Berkshire Hathaway?” They’re like, “That’s one of the largest companies in the world,” at the time. So, at that moment, I realized the opportunity cost and realized that people are expecting this.
So I need to figure out what are people’s expectations, make sure I can deliver the value they want but then charge what that is. We started increasing. We started coming up with a criteria going if we’re only going to be paid on performance, what are the types of companies that we need to work with? What are the ones that we need to turn down? I have a motto that there’s no such thing as a bad client. There’s only a bad prospect or a bad process. At the time, we were letting a lot of bad prospects in.
Andrew: I’m surprised Berkshire, considering how cheap they are, that they wouldn’t have just taken the $10,000 and run. I’m looking at their website. It’s not at all flashy. It looks like it’s from the ’90s.
Jason: I think the thing is if I sold you a Ferrari for $100, what are you going to think?
Andrew: That’s the thing about Berkshire, though, they don’t drive Ferraris.
Jason: I know.
Andrew: I get the bigger picture. I’m just surprised even they wouldn’t take you on because it felt laughingly cheap. I find that too. I think the way I would think about it is if I went to a restaurant and they suddenly charged—actually, this happened in New York—but going to this pizza store, “How much is a pizza?” “$0.75.” No way. I don’t feel like, “Wow, what a bargain.”
I feel like, “There’s no way I let that in my body.” I think, “Thank you for telling me.” So, when you have to up your game from $10,000 to being able to charge $200,000, you said you needed to know what they wanted, what it would take to get that. How do you know that? Who do you talk to to figure out what goes into a proposal for $200,000 versus $10,000?
Jason: Well, I started asking them what I call the three I’s. I’m about to sneeze. I know you guys don’t edit. I may just sneeze all over the camera.
Andrew: Sneeze right into the mic. Let it go, be human.
Jason: I would start asking the three I’s. I go what’s the biggest issue with what you want? What’s the impact on your business? How important is it to you? By finding that out and then asking those questions, they’re actually determining the value of what you’re about to do for them. So, a lot of times, people come to you for a website or CMS or whatever. They would say, “I just want a website because my competition has it.”
Then we would be the only ones that would say, “Why do you want to copy them? That’s probably why every company looks the same. If we actually redesign your website, what are the results we can actually get?” We would just start diving into that. Then we’d actually start walking them through the process or the plan.
This is probably one of the most important things when you’re selling someone a high-ticket item or really anything. They have to understand the plan. I’ll break it down into something really easy to comprehend. I used to teach people how to race cars. So, when I would tell people go through this corner at over 100 miles per hour, they’d be like, “You’re crazy. I’ve got kids. I don’t want to die.” I say, “Let me show you how it’s done and let me walk you through the plan. I’ll walk you through a systematic plan.”
I would give them comfort. I would give them trust, then they would see it done. Then they’d go through the corner at like 75, then 85, then 90, 100, then they’d beat me. I’d be like, “That’s awesome. Don’t race in my league. Go race in this other league so you don’t beat me.” It’s all about the plan. That’s what we started doing. We started winning all this business. At the end of the day, it didn’t matter what we charged.
What I found out was it mattered on the urgency. If I was about to have a heart attack, I’m not going to ask the doctor how much to save my life. My wife my ask that. I’m worth probably more dead to her, maybe. I’m going to say, “Just fix it and then I’ll figure out how to pay for it later because I value living more than what I’ll have to pay for the surgery.”
Andrew: So what you’re looking for is the thing that makes them almost desperate to hire you and the goals that they have so that you know the value of doing this work.
Jason: That’s right.
Andrew: Okay. That makes sense. Let me take a moment to talk about my second sponsor. Then I want to come back—I said the thing that separated you from the people I talk to in my audience who are struggling to get where you are is this systemization, this process. I know you’ve written a book on it. I don’t even think I brought it up. How is your book free, by the way, on Amazon? Is that because it’s a lead magnet for you? It’s called “Accelerating Your Agency: An Eight-System Playbook for Growing Your Agency Faster,” right?
Jason: Well, it’s only free on the Kindle if you have that subscription. So it’s not free.
Andrew: Kindle Unlimited, yeah.
Jason: People have to buy it. We don’t give that away.
Andrew: I see. I go back and forth with that Kindle Unlimited. I subscribe and then I find there are a couple of months where there’s nothing to read and I say, “Who cares? The price of a book is nothing. Let’s remove the subscription and pay for the book I want.” Then I realize how many books there are that I like that are on there and I go, “All right, I should just buy it.”
All right. My second sponsor is a company called HostGator. I bet you’ve heard of HostGator, right?
Jason: I have.
Andrew: They’ve been around since 2002. They started after you, though. Usually, most of my guests will say they started before I started my business. They started after you. Let me ask you this—as someone who’s helped people build websites, is there really a reason for a website right now? Shouldn’t people just go to YouTube, build their community that way?
Jason: Well, you’re on borrowed land. It’s kind of like someone saying, “I have a bunch of land in Colorado, go use it.” Then you build this infrastructure, you build this audience and at any time, I can kick you off and it’s my property. I look at a website as this is the only thing that you can control and you should use this as your central hub. I still believe websites are key. They’re not everything. But I still believe it’s the central hub and people do need websites.
Andrew: I agree. I feel like it’s losing a lot of its power, but it’s still effective. One of the things I was considering doing was moving over to Medium. Then you take a look at how Medium makes some really bad decisions about blogging content. They’ll put those buttons that say read it in the app, so it’s a horrible reading experience when that button takes over my screen. Then the top of the screen has this big bar for the publication on Medium that I’m on.
So I click the button to go over to their app and it’s so weird. It sometimes takes me back to the browser. There’s nothing like having your own website and yes, you can in addition to it create all these other presences online. If you’re looking for someone to host a website for you, I recommend the company that’s been around since 2002, the company that beat out many of the competitors, the company that many agencies to this day use to create websites and host websites for their clients.
A lot of people do that. They have clients. They want to build websites for them. They need a good package. HostGator will do that for you. If you’re looking for a company to host your website right, go check them out at not just HostGator but HostGator.com/Mixergy. That’s because Sachit Gupta, the guy who sold them this ad told them, “Look, if you’re working with us, no one’s going to use our URL unless you give Andrew’s people the best offer you can possibly give.” I think the one on their main website is 60% off. On HostGator.com/Mixergy, it’s up to 62% off.
Andrew: So one big reason to use it is it’s a big discount. The other is you continue to support the interviews that I do here on Mixergy. If you’re looking to get a good hosting company, whether you have one now and you hate them or you haven’t started, go to HostGator.com/Mixergy, 62% off.
What else did you do that now anyone who starts a company, starts and runs a business should do?
Jason: Well, you’ve got to set up the right systems in order to get to the next level. We’ve talked a lot about the first system, which is clarity. The second system is really important and a lot of people mess this up. It’s around positioning. You position yourself like everybody. You look at the bigger competitors and start modeling what they’re doing currently.
What you should have done is what you were doing with my website is do the Wayback Machine. Look at how they got there. Look at the steps they actually took and figure out how they got there and model that. Then when you’re positioning yourself, you need to position yourself as that trusted advisor. If you go to my website and you go to my about page now, JasonSwenk.com/about, you’re not going to see much about me until the very end, until the very bottom.
I’m going to start off with questions. I want to put the focal point on you. It’s not me. You could care less about me, be like, “Do you want to know how I created an eight-figure agency?” You’d be like, “Yeah, whatever.” But if I said, “Do you want to know how you can set up and grow your agency faster?” It’s going to get your attention.
It speaks to the audience you’re actually going after and just kind of positioning it that way, where you’re not that slimy guy coming up to you in the conference going, “Hey, can I sell you something? Can I sell you something?” You’re the guy that’s like, “Hey, who can I connect you with? You’re a cool dude. How can I help?” That kind of stuff. That’s the second system.
Then the third is—
Andrew: So number two is positioning. Discover how to become an authority in your market, where you are attracting the ideal clients and not having to deal with the small accounts that eat up your time. Position your agency as the choice, not a choice.
Andrew: So number three is what?
Jason: It’s the offering. So a lot of people pitch marriage right off the bat. You go like, “Oh, let me sell this huge retainer, $10,000, $100,000,” whatever it is. That’s a big decision. You have to build up a lot of trust. A lot of us haven’t built up that trust. So you have to slice off part of that offer into what I call like a foot in the door. The thing about how do you stagger them up, kind of what I call an offering ladder.
Then also too, you have to really understand what’s the value. When you’re coming up with your pricing, you need to start with what is the value you’re delivering to your clients and to come up with pricing on that. So an easy way we would always look at or toward the end is we would look at going, “What’s the average amount of revenue our clients got from this service?”
Then we’d average it up and then we’d divide it by ten. So, without a doubt, we would set the floor and say, “Look, you’re going to make 10x. Every dollar you give to us, we’ll give you $10 back based on what we’re doing.” We understood that value.
Andrew: I’m sorry. I’m a little lost with this, with the offering. I’m on your website. There’s a thing that comes up that says, “If you have a question, you can chat with me.” It’s a chat bot that’s there. Let’s use that. Someone comes to us, they want to create a chat bot agency that builds chat bots.
The big offering is chat bot creation, the sequence of messages that goes out, the auto responses, that whole thing could cost $3,000. You’re saying take a smaller piece of that, maybe just creating the chat bot that will take inbound and turn it over to a human being. That’s like your $500 foot in the door. Is that what you’re saying?
Jason: Actually, what I would do is I’d make it even easier. I would say let’s make sure you’re right for this and let’s map out a blueprint or a roadmap for you and charge $5,000 for this and an hour of your time and actually build it with them. And then from there, as you’re building that with them—obviously, they’re going to like that plan because you built it with them—this is not like a basic audit, go back, or whatever. You’re building it with them.
Then you position and say, “Let us set up this first couple of phases for you in a project.” Then while you’re in that project and as they start seeing some success, it’s not at the end of the project. It’s while you’re still in the project. You then start saying, “Based on what we’re going through right now, you could crush it if we start doing X, Y, and Z.” This is what we would actually recommend and getting then excited about it and to say, “Would you like us to do this for you? If you’d like us to do this, we can position X.”
So I did this with—when I first started doing this, I did this with an SEO agency in Australia, made a $5,000 a month retainer that they would sell right out of the gate, maybe closed about 50% on any given day, low percentage. I said, “Let’s sell a $2,500 foot in the door like I just described. Let’s sake your $5,000 a month that you charge. Let’s figure out how long does it start seeing for clients to see results? He said, “Two months.” I go, “Okay, great.” Let’s do a three-month project, get $15,000. While we’re in that project and they start seeing results in month two, start positioning what you would normally do for the $5,000 a month retainer, at $8,500. And you’re going to position a 12-month contract.
A lot of agencies and a lot of businesses position a retainer but they can cancel at any time. It’s a car payment that they’re paying for. You’re building that foundation that they can take any time and you don’t benefit. So what we were finding was the client that their old way, they would cancel about six months because the client did a bad job at communicating the value. That’s another part you need to get right. With this new model, they’re now making in the 15 months after, they made like $112,000 every 15 months based on this model.
Andrew: Who’s making that much money? The agency?
Andrew: Who’s making that money, the agency or their client?
Jason: The agency.
Andrew: Because what the agency did was they waited until they were far enough with the product with the first sell that the client could see results, see revenue, see profit and then they sold the retainer and the retainer was a year-long contract, not a cancel anytime so that the client is committed to keep working with the agency versus what most people would do is say I’m going to charge upfront and tell you while we’re doing this that I can continue to maintain it. You’re paying up front and paying for a monthly recurring. How long in your business did it take you to figure that out?
Jason: Maybe six or seven years. It took us a while.
Andrew: Solar Velocity for a long time was doing the old way, which is, “We’ll build your website. We’re going to charge you for this.” Then after you’re done, say, “By the way, do you want us to maintain it? We’ve got this monthly thing.”
Jason: Yeah. By doing this, you’re going to half that closing cycle in half, if not more.
Andrew: I’m looking at your website. You’ve got other systems. It’s a whole set of systems. Anyone who wants it can go check it out at JasonSwenk.com/playbook. I’m going to pick out one other one here. That’s the sales system. What’s the sales system like?
Jason: You have to have a process for making sure you’re getting the right information from the prospect as well as qualifying, making sure you’re chatting with the right people at the right time. I can’t tell you how many times I had like Darth Vader call up asking to do their website for free or half the budget. Then I’d only find out maybe a couple weeks or a hours later and I wasted all this time.
So what I realized was I needed to figure out in the first ten minutes are they the right prospect for me? If you remember NBAT—need, budget, authority, and timing. So, within the first 10 minutes, I would train our salespeople to ask this. We’d say, “What do you need?” And making sure that matches up with us. We’d also ask, “What is the budget you’re anticipating?” Here’s the question that people are always going to get. “Well, I don’t have a budget. You tell me.”
Here’s how you can get the budget 99% of the time. This has to fit your personality. There are two ways to do it. My personality would be like, “Hey, I don’t have a budget. I love working with people that don’t have a budget. So we don’t have to worry about money. We can try out all kinds of cool innovative things,” and then I’d shut up. And then they’d be totally silent. They’d give me the deer in the headlights look. I’d be like, “So you do have a budget.”
Then I would be what I call the reverse auctioneer. This is my second step or the second way to do it. It’s like you want to start high because psychologically, people are going to remember what they hear first. So, if you start low, they’re going to think you’re a low offer. I’d be like, “I need to know some kind of range to make sure we’re right for you and you’re right for us? Are you trying to stay around $1 million, $800,000, $700,000, $600,000, $500,000? I just need to know a range.” You’ll get a range every single time. Every time.
Andrew: You’re basically getting from them what their budget is to give you a sense of how much you can do with them or whether they’re like the Darth Vader example earlier where there is no money.
Jason: That’s right.
Andrew: You’ve got more on the site. People can go and see the other system, but also within the sales system, I know you’re talking about how to handle rejections. It’s so interesting to me. I used to think salespeople were so good because they could come up with a response on the fly to the best objections.
Then I remember my fried Hannah Moy in high school took me to this office that she was working in. She had an internship or after school job or something. We looked at the sales desk of all the top salespeople. He had a list of all the big objections and his responses because he was so used to seeing the same things over and over. He wasn’t making it up on the fly. When he was on the phone call. He had the answers. He thought it through.
All right. After you sold your business—actually, why did you sell and then I’ll come back with a question for after—why did you sell?
Jason: It was the right time, the right offer. We did it for 12 years. I knew I wanted something different. But I didn’t know what it was. Obviously, when someone offered us that, we were like, “Okay, yeah, take it.”
Andrew: I get it. So you sold it. Do you remember the day the money came in before the earnout started?
Jason: October 1st.
Andrew: October 1st. What was that like? Where did you hear about it? Where did you see the whole thing close up?
Jason: It was incredible. That was the day we sold. That’s when the money was wire transferred and all that kind of stuff. We were just like, “Holy cow. We did it.” It was a real emotional day. Everybody was excited. And then like a week later, I was completely depressed.
Jason: I didn’t have that significance anymore. I achieved the success. The journey is the coolest part, right? Think of Gary Vaynerchuk’s story, right? He always talks about buying the Jets. That’s going to be a day he’s depressed because he reached his pinnacle. There’s nothing else in his mind. That’s how I was. I had all these employees, all this team, all this responsibility. It was all gone. No one needed me anymore. I didn’t know what I was going to do. Yeah, we had money, but then what? I’m a builder. If I see something, I’ll be like, “That’s cool. Let me go build it.”
Andrew: So you didn’t have anything to build. That’s what led you to creating JasonSwenk.com as a place where you teach agency owners how to do this.
Jason: Well, it took me two years to figure that out. It was by accident, again. I had one of my old competitors reach out and say, “How’d you sell? How did you do this?” And I helped him out and I loved it. I had that significance back. I was good at it. My wife, who’s smarter than me, said, “Why don’t you do that?” So I was like, “Okay, let me do that.” It’s changed everything. Now, all I’m trying to do now is create a resource I wish I had. It’s an unbelievable business. I get so much significance from it and love it.
Andrew: I should have had this ahead of time. Someone recently in my audience sent me all kinds of information about you. It was me—I told you before the interview started—saying, “Jason is so smart. He’s about to do an episode with me on Mixergy.”
He sent me all this info about himself. Let me go get that to add that to my Google Doc to prepare. Then I realized it’s not from Jason. It’s from someone else running an agency. For anyone who wants to check you out, they can go to JasonSwenk.com. The last name is spelled S-W-E-N-K, JasonSwenk.com. I think some of the YouTube videos are pretty interesting, especially the ones that go back in time.
I want to thank my two sponsors for making this happen. The first is a company that will host your website right. It’s called HostGator.com/Mixergy. The second is a company where you can hire phenomenal developers. A lot of agencies don’t have developers for everything their clients need. They go to Toptal and say, “Toptal, we have somebody who needs this kind of work. Can we bring one of your developers on board just for that project?” And yes, they often can get it done. So, if you’re looking to hire someone on a per project basis to do your work, to do work for your clients, go check them out at Toptal.com/Mixergy.
Jason, thanks for doing this.
Jason: Thanks for having me.